Answer to Chapter 11 quiz MC questions

Answer to Chapter 11 quiz MC questions - 1.

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1. The issue is if Knedler Corp accepts to fill this special order, what is the relevant cost of  720 units? Is it $9.90 or $10.10? What cost is relevant (a cost is relevant if it can be avoidable)? a. If Knedler decides not to fill the special order, it would delay the need to replenish its  raw materials at the current market cost of $10.10, therefore the $10.10 is an  avoidable cost . Avoidable costs are relevant in decision making. b. The $9.90 per liter of the existent inventory is  sunk cost  because it does not matter  what Knedler does, it cannot be changed . Sunk costs are irrelevant in decision  making. Therefore, Knedler must consider $10.10 per liter as relevant cost in pricing the special  order: 720 liters X $10.10 = $7,272 2. The issue is what is relevant information: a. The contribution margin of the department is $50,000. This means Parry Company 
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This note was uploaded on 02/08/2011 for the course ACCOUNTING 275 taught by Professor Ngo during the Spring '11 term at Rutgers.

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Answer to Chapter 11 quiz MC questions - 1.

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